Saudi Arabia Leads Middle East and Africa in Construction Activity

Saudi Arabia’s Construction Activity Index (CAI) continues to show its strongest readings in the region, according to the latest Global Construction Monitor (GCM) by the Royal Institution of Chartered Surveyors (RICS) in the UK.

Saudi Arabia has taken up several infrastructure projects valued around over $1 trillion and they include the $500 billion NEOM City on the coast of Red Sea. Besides seeking huge investments, the Kingdom has drawn up plans to develop the country tourism sector by attracting 100 million tourists by 2030.

The Kingdom continues to lead the industry compared to all other markets tracked globally in the third quarter of 2023. Meanwhile, the UAE remains among the best-performing countries in the world in the construction sector.

Third quarter results in 2023 across the Middle East and Africa indicated strong foundations for the construction market, the GCM said.

“In fact, construction workloads continue to rise across all sectors at a key regional level. This is particularly driven by strong growth in private residential developments. Furthermore, the 12-month forecast indicates an ongoing strong expansion in the construction sector. Therefore, most countries across the region are showing positive outlooks,” it said.

Saudi Construction Activity

Saudi Arabia continues to show the strongest reading in the CAI at the regional and global levels. Elsewhere, inflation index readings were positive for Mauritius, the UAE, Oman, Nigeria, and Egypt. Each market witnessed widespread growth in construction workloads during the third quarter of this year.

At the weaker end of the index, Qatar’s construction activity index falls on the negative spectrum as the tiny Gulf nation completed all its 2022 FIFA World Cup projects last year. This is driven by a further decline in activity across all sectors.

Challenges for UAE

On the other hand, the UAE’s CAI remains strong and steady. The UAE’s construction industry is among the world’s leading sectors, with a reading of +54% during the third quarter. This marks the UAE’s strongest performance since the survey commenced five years ago.

The CAI also recorded a very positive reading of +45%. Meanwhile, the private residential sector reported the strongest increase at +56 percent, with all other sectors recording positive results.

However, further growth is hindered due to labour and skills shortages as well as high material costs. Similar to other markets, the supply of skilled trades is decreasing. This also applies to other roles with high skill and experience requirements, such as quantity surveyors and managers.

Against all odds, the UAE’s construction sector demonstrates resilience through ever-increasing construction activity and new business inquiries. With all that being said, the UAE remains one of the most prominent markets in the global construction market.

Despite the overall optimistic tone across much of the Q3 data, over three-quarters of respondents based in the MEA region cited challenges with respects to material costs and financial constraints.

At the same time, although 49% of MEA respondents in aggregate reported experiencing skills shortages, this share is much higher in markets such as Saudi Arabia (where 70% note difficulties acquiring skilled personnel, the GCM added.